WACC in Emerging Markets
Hello everyone,
I recently talked with a girl who, during her summer analyst interview, got asked this question: "How does WACC change if you value a company in an emerging market?".
How would you people answer this?
Thanks a lot!
You have to account for the additional risk of the company operating in an emerging market, therefore you will have a higher equity risk premium to compensate that will increase your cost of equity.
For the cost of debt, you can use the default spread of that country and of the company, cost of debt: rfr + sovereign default spread + company default spread
Great thank you for the clarification!
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